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CNBC Squawkbox Europe

LET'S LOOK AT THE S&P 500 DAILY CHART

S&P 500 Index

Two weeks ago we put up this picture which shows the range of the decline divided into 1/8 and 1/3. Our forecast calls for this time to be a period of distribution before a two year bear trend. In order for this to be part of a distribution pattern the down trend should not continue. There were two points in time that could bring in lows. The first was 60 calendar days from high or today and the next is 90 from high around July 23rd. The price for the 60 day low was around 1069. Obviously the manner in which this index has come down is not what I wanted to see with a large gap down directly after the high and "follow through." I would like to see the index hold together and rally into early September as that could start the bear trend. If the index goes to 1040 and only bounces one day and goes to a new low the next it could be a crash scenario. I doubt that scenario but if the one day bounce occurs that is the probability.

LET'S LOOK AT THE FTSE WEEKLY CHART

FTSE Weekly Chart

This may help make my point. Notice the previous top and the last rally after the high. That rally was a secondary high and allowed for the distribution before changing the trend. You can clearly see our current circumstance is a complete wave structure into the high. This trend is complete so there will be either a distribution and bear trend or another 5 wave structure up. The latter seems very unlikely. The index was turned back by the last low before the final high and that should be all there is. There may not be a secondary high as occurred in 2007 but there should be some sort distribution or "trading on the side." In 2007 the secondary high was a 60 calendar day rally exactly and the next lower high was 72 calendar days from low and the last lower high before the trend started was 140 calendar days (144).

LET'S LOOK AT GOLD DAILY CHART

Gold Daily Chart

One of two dominant cycles in gold is a 144 vibration in time. The last high in 2009 was a 144 calendar days low to high. Like most time cycle, if valid, will exhaust the trend with a portion of the cycle. Three quarters of the cycle is 108 days, so a 108 day low leaves the probability of a 36 day run to complete the trend. The run up in 2009 was a classic exhaustion or vertical ascent into top. This current move up is not an exhaustive style of trend but a struggle and struggling legs can also end trends. This can be qualified as a weak trend since the 108 day low each new high within the trend is immediately reversed and fell below the high it just broke above. So there is a probability of ending this leg up in gold between the 28th and no later than the 7th July. The index has already hit the calculated resistance so a lower high or counter trend is possible. Anyway, we are looking for some evidence of top in Gold.

 

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